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Research in managerial decision making has shown that executives, especially the more senior and experienced ones, resort extensively to something variously called intuition, gut feel, or, simply, judgment
this sense of knowing without knowing why is actually the internal signal of judgment completion
internal signal is a self-administered reward,
pleasing sense of coherence,
construed not as a feeling but as a belief.
masquerades as rational confidence in the validity of one’s judgment
both bias and noise contribute to prediction errors, the largest source of such errors is not the limit on how good predictive judgments are.
is the limit on how good they could be. This limit, which we call objective ignorance,
PC of 80% roughly corresponds to a correlation of .80. This level of predictive power is rarely achieved in the real world.
None of these events and circumstances can be predicted today—not by you, not by anyone else, and not by the best predictive model in the world.
One way or the other, you are in a state of less-than-perfect information.
intractable uncertainty (what cannot possibly be known) and imperfect information (what could be known but isn’t) make perfect prediction impossible.
objective ignorance of important unknowns severely limits achievable
accuracy.
take a terminological liberty here, replacing the commonly used uncer...
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people who engage in predictive tasks will underestimate their objective ignorance.
Overconfidence is one of the best-documented cognitive biases.
predic...
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notoriously overc...
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wherever there is prediction, there is ignorance, and more of...
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Expert Political Judgment.
the book amounted to a devastating attack on the ability of
experts to make accurate predictions about po...
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the supposed experts are stunningly unimpressive.
“The average expert was roughly as accurate as a dart-throwing chimpanzee.”
were not “better than journalists or attentive readers of the New York Times in ‘reading’ emerging situations.”
experts barely exceeded this very low standard.
most salient feature of their performance was their excessive confidence in their predictions.
Pundits blessed with clear theories about how the world works were the most confident and the least accurate.
Unforeseeable events are bound to occur, and the consequences of these unforeseeable events are also unforeseeable.
limit on expert political judgment is set not by the cognitive limitation of forecasters but by their intractable objective ignorance of the future.
deserve some criticism for attempting an impossible task and for believing they can succeed in it.
superforecasters, are consistently better at it than most others,
mechanical aggregation of information is often superior to human judgment,
Models are consistently better than people, but not much better.
There is essentially no evidence of situations in which people do very poorly and models do very well with the same information.
there is a large amount of objective ignorance in the prediction of human behavior.
the model probably approaches the limits of objective ignorance.
people often mistake their subjective sense of confidence for an indication of predictive validity.
illusion of validity: the accuracy you can achieve with the information you were given is quite low.
believe themselves capable of an impossibly high level of predictive accuracy are not just overconfident.
believe in the predictability of events that are in fact unpredictable,
this attitude amounts to a denial of ignorance.
voice of confidence, of “knowing without knowing why.”
objective assessment of the evidence’s true predictive power will rarely justify that level of confidence.
giving up the emotional reward of the internal signal is a high price to pay when the alternative is some sort of mechanical process that does not even claim high validity.
many decision makers will reject decision-making approaches that deprive them of the ability to exercise their intuition.
Have we checked whether the experts we trust are more accurate than dart-throwing chimpanzees?”
let’s make sure we have the best possible decision process.”
we maintain an unchastened willingness to make bold predictions about the future from little useful information.
